US Federal Reserve announces $85 billion bailout of insurance giant AIG
By Bill Van Auken

Following emergency consultations between the Federal Reserve, the US Treasury and the Democratic leaders of both houses of Congress, the Federal Reserve on Tuesday night announced a bailout of the Wall Street insurance giant American International Group (AIG).According to reports posted by the New York Times and the Wall Street Journal, under the emergency plan the Fed will provide the failing firm with an $85 billion loan in exchange for 80 percent of its assets.

The reported bailout is a reversal of the policy adopted by the federal government just last weekend, when it failed to intervene to stop the collapse of Lehman Brothers, the country’s fourth largest investment bank. According to the Journal, government officials believed “it would be ‘catastrophic’ to allow AIG to fail.” Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson, the newspaper said, “concluded that federal assistance would be necessary to avert an AIG bankruptcy, which they feared would have disastrous repercussions throughout the financial markets.”

The bailout is one more demonstration of the systemic crisis confronting American and world capitalism. It is unprecedented and, in some respects, goes even further than the government takeover of Fannie Mae and Freddie Mac barely a week before. Unlike the two mortgage finance giants, AIG is not a government-sponsored institution and is not even directly regulated by the federal government.

Link to con.